Commissioner Bernard L. McNamee Concurrence Regarding Alaska Gasline Development Corporation (Alaska LNG Project)

Commissioner Bernard L. McNamee Statement
May 21, 2020
Docket No. CP17-178-000
Order: C-7 
Concurrence Regarding Alaska Gasline Development Corporation (Alaska LNG Project)

Today’s order grants Alaska Gasline Development Corporation (AGDC) authorization under section 3 of the Natural Gas Act (NGA)[1] to site, construct, and operate the Alaska LNG Project (Project).[2]  The Project will consist of a gas treatment plant located in the Prudhoe Bay Unit of Alaska’s North Slope, and two natural gas pipelines connecting production units to the gas treatment plant; an approximately 806.9-mile-long, 42-inch-diameter mainline pipeline capable of transporting up to 3.9 billion cubic feet of gas per day from the gas treatment plant to the liquefaction facilities; 344,000 horsepower of compression located at eight compressor stations along the mainline pipeline; and liquefaction facilities on the Kenai Peninsula designed to produce up to 20 million metric tons per annum of liquefied natural gas (LNG) for export.[3] 

I fully support the order as it complies with the Commission’s statutory responsibilities under the NGA and National Environmental Policy Act (NEPA).  The order determines that the siting, construction, and operation of the Project is not inconsistent with the public interest.[4]  The order also finds that the environmental impacts associated with the Project are acceptable.[5]  Further, consistent with the holding in Sierra Club v. FERC (Sabal Trail),[6] the Commission quantified and considered the direct and indirect greenhouse gases (GHGs) emitted during the construction and operation of the Project.[7]

Although I fully support today’s order authorizing the Project, I write separately to address what I perceive to be a misinterpretation of the Commission’s authority under the NGA and NEPA.  There have been contentions that the NGA authorizes the Commission to establish measures to mitigate project-related GHG emissions, and that the Commission violates the NGA and NEPA by not determining whether GHG emissions significantly affect the environment.  I disagree.

I believe that the Commission can consider project-related emissions in its NGA section 3 public interest determination and is required to consider them in its NEPA analysis.  However, the Commission has no reasoned basis to determine whether GHG emissions will have a significant effect on climate change nor the authority to establish its own basis for making such a determination.  Further, the Commission does not have the authority to unilaterally establish measures to mitigate GHG emissions.  It is my intention that my discussion below will assist the Commission, the courts, and other parties in their arguments regarding the Commission’s consideration of a project’s effect on climate change.  

I. The Commission has no standard for determining whether GHG emissions significantly affect the environment

Commenters argue that the Commission violates the NGA and NEPA by not determining the significance of GHG emissions that are effects of the Project.[8]  My colleague has made similar arguments.[9]  He has challenged the Commission’s explanation that it cannot determine significance because there is no standard for determining the significance of GHG emissions.[10]  He has argued that the Commission can adopt the Social Cost of Carbon[11] to determine whether GHG emissions are significant or rely on its own expertise as it does for other environmental resources, such as visual resources and surface water resources.[12]  He has suggested that the Commission does not make a finding of significance in order to conclude that a project is not inconsistent with the public interest.[13]

I disagree with these contentions.  The Social Cost of Carbon is not a suitable method for determining whether GHG emissions that are caused by a proposed project will have a significant effect on climate change and the Commission has no authority or reasoned basis using its own expertise to make such a determination.

A. Social Cost of Carbon is not a suitable method to determine significance

The Commission has found, and I agree, that the Social Cost of Carbon is not a suitable method for the Commission to determine significance of GHG emissions.[14]  Because the courts have repeatedly upheld the Commission’s reasoning,[15] I will not restate the Commission’s reasoning here. 

However, I will address the suggestion that the Social Cost of Carbon can translate a project’s impact on climate change into “concrete and comprehensible terms” that will help inform agency decision-makers and the public at large.[16]  The Social Cost of Carbon, described as an estimate of “the monetized damages associated with an incremental increase in carbon emissions in a given year,”[17] may appear straightforward.  On closer inspection, however, the Social Cost of Carbon and its calculated outputs are not so simple to interpret or evaluate.[18]  When the Social Cost of Carbon estimates that one metric ton of CO2 costs $12 (the 2020 cost for a discount rate of 5 percent),[19] agency decision-makers and the public have no basis or benchmark to determine whether that cost is significant.  Bare numbers standing alone simply cannot ascribe significance.

B. The Commission has no authority or reasoned basis to establish its own framework

Some argue that the lack of externally established targets does not relieve the Commission from establishing a framework or targets on its own.  Some have suggested that the Commission can make up its own framework, citing the Commission’s framework for determining return on equity (ROE) as an example.  However, they overlook the fact that Congress designated the U.S. Environmental Protection Agency (EPA), not the Commission, with exclusive authority to determine the amount of emissions that are harmful to the environment.  In addition, there are no available resources or agency expertise upon which the Commission could reasonably base a framework or target.

As I explain below, Congress enacted the Clean Air Act to establish an all-encompassing regulatory program, supervised by the EPA to deal comprehensively with interstate air pollution.  Section 111 of the Clean Air Act directs the Administrator of the EPA to identify stationary sources that “in his judgment cause[], or contribute[] significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare”[20] and to establish standards of performance for the identified stationary sources.[21]  Thus, the EPA has exclusive authority for determining whether emissions from pipeline facilities will have a significant effect on the environment and for establishing an emissions control regime.

Further, the Commission is not positioned to unilaterally establish a standard for determining whether GHG emissions will significantly affect the environment when there is neither federal guidance nor an accepted scientific consensus on these matters.[22]  This inability to find an acceptable methodology is not for a lack of trying.  The Commission reviews the climate science, state and national targets, and climate models that could inform its decision-making.[23]

Moreover, assessing the significance of project effects on climate change is unlike the Commission’s determination of ROE.  Establishing ROE has been one of the core functions of the Commission since its inception under the FPA as the Federal Power Commission.[24]  And, setting ROE has been an activity of state public utility commissions, even before the creation of the Federal Power Commission.[25]  The Commission’s methodology is also founded in established economic theory.[26]  In contrast, assessing the significance of GHG emissions is not one of the Commission’s core missions and there is no suitable methodology for making such determination.    

It has been argued that the Commission can establish its own methodology for determining significance, pointing out that the Commission has determined the significance of effects on visual resources and surface water resources using its own expertise and without generally accepted significance criteria or a standard methodology. 

I disagree.  As an initial matter, it is important to note that when the Commission states it has no suitable methodology for determining the significance of GHG emissions, the Commission means that it has no reasoned basis for making such finding.  The Commission’s findings regarding significance for visual resources and surface water resources have a reasoned basis.  For example for impacts to visual resources, the Commission reasonably finds that project construction and operation would not significantly affect visual resources based on  the Final Environmental Impact Statement’s (EIS) assessment using the U.S. Bureau of Land Management’s (BLM) Visual Resource Management System.  The Visual Resource Management System provides a process for assessing visual impacts, including defining the management directives for each landscape, conducting simulations of future visual conditions at key observation points, describing the contrast the Project would create, and then describing visual impacts based on the degree to which contrast affects the ability to achieve visual resource objectives.[27]  Given that visual conditions cannot be evaluated from every possible viewpoint, BLM requires the identification of key observation points, which may include “critical viewpoints,” “typical views encountered in representative landscapes,” and “any special project or landscape features.”[28] 

To assess the Project’s visual impacts, AGDC together with the National Park Service identified a total of 91 key observation points.[29]  Using definitions provided in BLM Manual H-8431, the Final EIS determines whether impacts to each key observation point would be high, moderate, or low, or whether there would be no effect.[30]  Of the 91 identified key observation points, the Final EIS states that project construction would have a high impact on 11 key observation points and project operation would have a high impact on 9 key observation points.[31]  For selected key observations points, including those with anticipated high impacts, the Final EIS then discusses AGDC’s proposed mitigation, such as AGDC’s implementation of its Project Revegetation Plan and Project Lighting Plan.[32]  Based on this information, the Commission was able to anticipate the effect that the Project would have on existing visual resources and made a reasoned finding that the Project’s effect on visual resources would not significantly affect existing visual resources.  

In contrast, the Commission cannot anticipate the effects that the Project would have on the existing climate, and, thus, has no reasoned basis to determine whether a project has a significant effect on the climate.  The Commission can only quantify the amount of project emissions.  That calculated number, however, cannot inform the Commission on the specific effects that the Project could have on climate change, e.g., increase of sea level rise, effect on weather patterns, or effect on ocean acidification.  Nor are there acceptable scientific models that the Commission may use to attribute every ton of GHG emissions to a specific physical climate change effect.    

Without adequate support or a reasoned target, the Commission cannot ascribe significance to particular amounts of GHG emissions.  To do so would not only exceed our agency’s authority, but would risk reversal upon judicial review.  Courts require agencies to “consider[] the relevant factors and articulate[] a rational connection between the facts found and the choice made.”[33]  Simply put, stating that an amount of GHG emissions appears significant without any reasoned support fails to meet the agency’s obligations under the Administrative Procedure Act (APA). 

II. The NGA does not contemplate the Commission establishing mitigation for GHG emissions from LNG Facilities

There have also been contentions that the Commission should require the mitigation of GHG emissions related to the authorized facilities.[34]  I understand these suggestions as proposing a carbon emissions fee, offsets or tax (similar to the Corps’ compensatory wetland mitigation program), technology requirements (such as scrubbers), or emission caps.  Some argue that the Commission can require such mitigation under NGA section 3(e)(3)(A), which provides “the Commission may approve an application . . . in whole or in part, with such modifications and upon such terms and conditions the Commission find necessary or appropriate.”[35]

I disagree.  The Commission cannot interpret NGA section 3(e)(3)(A) to allow the Commission to unilaterally establish measures to mitigate GHG emissions because Congress, through the Clean Air Act, assigned the EPA and the States exclusive authority to establish such measures.  Congress designated the EPA as the expert agency “best suited to serve as primary regulator of greenhouse gas emissions,” [36] not the Commission.

The Clean Air Act establishes an all-encompassing regulatory program, supervised by the EPA to deal comprehensively with interstate air pollution.[37]  Congress entrusted the Administrator of the EPA with significant discretion to determine appropriate emissions measures.  Congress delegated the Administrator the authority to determine whether pipelines and other stationary sources endanger public health and welfare; section 111 of the Clean Air Act directs the Administrator of the EPA “to publish (and from time to time thereafter shall revise) a list of categories of stationary sources.  He shall include a category of sources in such list if in his judgment it causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare”[38] and to establish standards of performance for the identified stationary sources.[39]  The Clean Air Act requires the Administrator to conduct complex balancing when determining a standard of performance, taking into consideration what is technologically achievable and the cost to achieve that standard.[40]

In addition, the Clean Air Act allows the Administrator to “distinguish among classes, types, and sizes within categories of new sources for the purpose of establishing such standards.”[41]  The Act also permits the Administrator, with the consent of the Governor of the State in which the source is to be located, to waive its requirements “to encourage the use of an innovative technological system or systems of continuous emission reduction.”[42]

Congress also intended that states would have a role in establishing measures to mitigate emissions from stationary sources.  Section 111(f) notes that “[b]efore promulgating any regulations . . . or listing any category of major stationary sources . . . the Administrator shall consult with appropriate representatives of the Governors and of State air pollution control agencies.”[43]

Thus, the text of the Clean Air Act demonstrates it is improbable that NGA section 3(e)(3)(A) allows the Commission to establish GHG emission standards or mitigation measures out of whole cloth.  To argue otherwise would defeat the significant discretion and complex balancing that the Clean Air Act entrusts in the EPA Administrator, and would eliminate the role of the States.

Furthermore, to argue that the Commission may use its NGA conditioning authority to establish GHG emission mitigation—a field in which the Commission has no expertise—and address climate change—an issue that has been subject to profound debate across our nation for decades—is an extraordinary leap.  The Supreme Court’s “major rules” canon advises that agency rules on issues that have vast economic and political significance must be treated “with a measure of skepticism” and require Congress to provide clear authorization.[44]  The Court has articulated this canon because Congress does not “hide elephants in mouseholes”[45] and “Congress is more likely to have focused upon, and answered, major questions, while leaving interstitial matters to answer themselves in the course of the statute’s daily administration.”[46] 

Courts would undoubtedly treat with skepticism any attempt by the Commission to establish out of whole cloth measures to mitigate GHG emissions.  Congress has introduced climate change bills since at least 1977,[47] over four decades ago.  Over the last 15 years, Congress has introduced and failed to pass 70 legislative bills to reduce GHG emissions—29 of those were carbon emission fees or taxes.[48]  For the Commission to suddenly declare such power resides in the long-extant NGA and that Congress’s efforts were superfluous strains credibility.  Requiring LNG facilities and related pipelines to pay a carbon emissions fee or tax, or to invest in GHG mitigation would be a major rule, and Congress has made no indication that the Commission has such authority. 

Some may make the argument that the Commission can require mitigation without establishing a standard.  I disagree.  Establishing mitigation measures requires determining how much mitigation is required – i.e., setting a limit, or establishing a standard, that quantifies the amount of GHG emissions that will adversely affect the environment.  Some may also argue that the Commission has unilaterally established mitigation in other contexts, including wetlands, soil conservation, and noise.  These examples, however, are distinguishable.  Congress did not exclusively assign the authority to establish avoidance or restoration measures for mitigating effects on wetlands or soil to a specific agency.  The Corps and the EPA developed a wetlands mitigation bank program pursuant to section 404 of the Clean Water Act.[49]  Congress endorsed such mitigation.[50]  As for noise, the Clean Air Act assigns the EPA Administrator authority over determining the level of noise that amounts to a public nuisance and requires federal agencies to consult with the EPA when its actions exceed the public nuisance standard.[51]  The Commission complies with the Clean Air Act by requiring project noise levels in certain areas to not exceed 55 dBA Ldn, as required by EPA’s guidelines.[52]

Accordingly, there is no support that the Commission can use its NGA section 3 authority to establish measures to mitigate GHG emissions from LNG facilities.

III. Conclusion

In sum, the Commission has no reasoned basis for determining whether GHG emissions are significant that would satisfy the Commission’s APA obligations.  Nor does the Commission have the ability to establish measures to mitigate GHG emissions.  Pursuant to the Clean Air Act, Congress exclusively assigned authority to regulate emissions to the EPA and the States. 

I recognize that some believe the Commission should do more to address climate change.  The Commission, an energy agency with a limited statutory authority, is not the appropriate authority to establish a new regulatory regime.

For these reasons, I respectfully concur.